A Defense of the Beleaguered WTO Appellate Body

A Defense of the Beleaguered WTO Appellate Body

Steve Charnovitz

9 May 2019

In November 2017, I authored a paper warning that the Trump Administration was seeking to eviscerate World Trade Organization (WTO) dispute settlement. At the same time, I put forward a specific proposal for what the Appellate Body could do to save the Dispute Settlement Understanding (DSU) of the WTO (Steve Charnovitz, "How to Save WTO Dispute Settlement from the Trump Administration, 3 November 2017, https://worldtradelaw.typepad.com/ielpblog/2017/11/how-to-save-wto-dispute-settlement-from-the-trump-administration.html). My proposal was for the Appellate Body to amend its rules to state that in the event three or more vacant appellator slots existed, that the "completion of the appeal" would automatically occur on the same day that any appeal was lodged. Had the Appellate Body adopted my plan, they could have insulated the WTO dispute system from the impending nightmare scenario of a right of any WTO defendant government to block the adoption of a WTO panel report merely by appealing it to an out-of-business Appellate Body.

Unfortunately, the Appellate Body did not adopt my rescue plan.

Now, over 18 months later, the WTO continues to struggle with the implications of United States rejectionism against the trading system. In recent weeks, I have noticed an increase in new disturbing trends at the WTO. I've seen well-intentioned WTO member governments offering proposals to rewrite the DSU in an effort to appease the Trump Administration.

I had hoped by now that governments had learned that appeasement of authoritarians never works. The Trump Administration is seeking to destroy the international rule of law on trade, and other WTO members should not be accomplices in this mayhem.

There are worse things than losing an Appellate Body or losing the automatic adoption of WTO panel reports.

On 7 May 2019 in Geneva, Trump's Ambassador to the WTO Dennis Shea gave a tough speech to the WTO General Council. The Ambassador's remarks were replete with misstatements of trade law and misstatements of fact. This was par for the course in an Administration that seems to believe that if one repeats a falsity enough, it will become true.

So far, I have not seen any refutation of Ambassador Shea's spurious assertions. So, for the record, let me debunk them one by one.

Shea's first claim is that there is a DSU rule that "A person who has ceased to be an Appellate Body member may not continue deciding appeals as if his term has been extended by the Dispute Settlement Body." That claim is untrue because the Appellate Body, pursuant to its authority in DSU Article 17.9, enacted Working Procedures back in the mid-1990s that provided for the contingency of an expiration of an appellator term during the pendency of an appeal on which the appellator had been assigned to "serve." This administrative law (Rule 15) allows such an appellator to complete his or her service on that appeal. The Trump Administration has suggested that Rule 15 is ultra vires, but DSU Article 17.1 does not contain any conflicting black letter law that in the event that an appellator term expires, the appellator must resign from a tribunal.

Consider this counterfactual: If the Appellate Body had not written the wise contingency rule (in Rule 15), the Appellate Body would have had to discontinue many ongoing appeals when one of the sitting appellator's term ended. Scotching ongoing appeals might have been convenient for the United States which is the most frequent WTO defendant and the most frequent loser of WTO cases against it. But judicial dissolution would have been a bad outcome for the WTO dispute system.

Second, Shea asserts that there is a DSU rule that "The Appellate Body may not make findings on issues of fact...." No authority was offered for that proposition and certainly the DSU does not forbid the Appellate Body from making incidental statements of fact. Of course, the Appellate Body should not entertain new facts and or substitute itself for the panel's role as the trier of facts. But the Appellate Body has not done so. The DSU does say that appeals "are limited to issues of law," but that basis for appeal should not be understood to prohibit the Appellate Body from addressing the facts necessary to accomplish its mandate "to uphold, modify or reverse the legal findings and conclusions of the panel" (DSU Article 17.13).

Third, Shea asserts that there is a DSU rule that "The Appellate Body may not give advisory opinions on issues that will not assist the DSB [Dispute Settlement Body] in making a recommendation to bring a WTO-inconsistent measure into compliance with WTO rules." While there is no DSU rule stating that proposition exactly, no one would deny that the Appellate Body should not be issuing advisory opinions. But the Appellate Body has not issued such opinions. Thus, Shea's assertion that "the DSU provides for rules, and "those rules have been broken with impunity by the Appellate Body" is false. So is his assertion that the Appellate Body "is disregarding the clear rules."

Fourth, Shea argues that there is a rule that "The Appellate Body may not assert that its reports serve as precedent or provide authoritative interpretations." Certainly, nothing in the DSU prohibits tribunal decisions from being considered as precedent by future tribunals. The entire history of dispute settlement in the General Agreement on Tariffs and Trade (GATT) going back to the early 1950s shows the regular attention by tribunals to precedent. Quite rightly, the Appellate Body has posited that absent cogent reasons, an adjudicatory body will resolve the same legal question in the same way in a subsequent case. Consistent with the approach taken by other newly-created international tribunals over the past century, the WTO Appellate Body has sought to clarify its role as a higher-level tribunal in a continuing legal system. As the DSU explains, WTO dispute settlement "is a central element in providing security and predictability to the multilateral trading system" (DSU Article 3.2). Imagine the hypothetical of the Appellate Body stating in its rules that panels should feel free to consider every case de novo and to flout the jurisprudence of the Appellate Body. Certainly, such a disconnected legal system would have failed to provide the security and predictability sought by the United States and other WTO governments who drafted the DSU. Finally, I know of no evidence that the Appellate Body has ever said that is rulings are "authoritative interpretations," and Shea cites no caselaw to that effect.

Fifth, Shea states that "the Appellate Body may not change Members' substantive rights or obligations as set in the text of the WTO agreements." That statement is true as evidenced by DSU Article 19.2. But the Trump Administration's assertion that the Appellate Body has broken this rule is false. The biggest problem the United States has with the Appellate Body is that the United States has lost an obscene number (presently 49) cases against it for violating WTO trade remedy rules. The perennial arguments by the US Trade Representative about the Appellate Body have little to do with WTO constitutional principles. Rather, the behavior of US trade officials can be explained by the longtime US abuse of trade remedies (like antidumping duties) to protect politically connected US industries.

Seventh, Shea asserts that "the Appellate Body must circulate its reports within 90 days of an appeal." Under DSU Article 17.5, the 90-day deadline is real. And it's true that the Appellate Body has in recent years often missed that deadline. But to assert that the Appellate Body is "disregarding" this clear timing rule is a false claim. A missed deadline by the Appellate Body is not an expression of its agency, but rather a manifestation of the principle of necessity. Every time it misses the 90-day deadline, the Appellate Body explains why in advance. The top reason has been the lack of judicial or staff resources.

Under WTO law, WTO members have an obligation to provide the Appellate Body "with appropriate administrative and legal support as it requires" (DSU Article 17.7 emphasis added) and to fill appellator vacancies "as they arise" (DSU Article 17.2) WTO Members have failed to fulfill those two key administrative obligations, and the Appellate Body should not be blamed for those failures.

During the past week in meetings in Washington, DC, I have heard it said several times that the Appellate Body is guilty of "overreaching" and that it is "exceeding its mandate." Such mantras are not true, no matter how often they are repeated. Since 1996, I have examined over 140 WTO Appellate Body decisions. I have discussed many of them in my classes and wrote commentary on more than I wish to remember. Sometimes by my lights, the Appellate Body gets its wrong. But like any independent international or domestic court, the Appellate Body is interpreting and enforcing the law as it sees it.

It's a myth that the Appellate Body is "overreaching", "coloring outside the lines", "exceeding its mandate" or any of the other similar criticisms being hurled at the Appellate Body by bullies who know that the Appellate Body will refrain from trying to defend itself.

I am happy to defend the Appellate Body. And WTO Member governments need to stand up to the Trump Administration and not cave into its efforts to crush the WTO compliance system.

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A Defense of the Beleaguered WTO Appellate Body

A Defense of the Beleaguered WTO Appellate Body

Steve Charnovitz

9 May 2019

In November 2017, I authored a paper warning that the Trump Administration was seeking to eviscerate World Trade Organization (WTO) dispute settlement. At the same time, I put forward a specific proposal for what the Appellate Body could do to save the Dispute Settlement Understanding (DSU) of the WTO (Steve Charnovitz, "How to Save WTO Dispute Settlement from the Trump Administration, 3 November 2017, https://worldtradelaw.typepad.com/ielpblog/2017/11/how-to-save-wto-dispute-settlement-from-the-trump-administration.html). My proposal was for the Appellate Body to amend its rules to state that in the event three or more vacant appellator slots existed, that the "completion of the appeal" would automatically occur on the same day that any appeal was lodged. Had the Appellate Body adopted my plan, they could have insulated the WTO dispute system from the impending nightmare scenario of a right of any WTO defendant government to block the adoption of a WTO panel report merely by appealing it to an out-of-business Appellate Body.

Unfortunately, the Appellate Body did not adopt my rescue plan.

Now, over 18 months later, the WTO continues to struggle with the implications of United States rejectionism against the trading system. In recent weeks, I have noticed an increase in new disturbing trends at the WTO. I've seen well-intentioned WTO member governments offering proposals to rewrite the DSU in an effort to appease the Trump Administration.

I had hoped by now that governments had learned that appeasement of authoritarians never works. The Trump Administration is seeking to destroy the international rule of law on trade, and other WTO members should not be accomplices in this mayhem.

There are worse things than losing an Appellate Body or losing the automatic adoption of WTO panel reports.

On 7 May 2019 in Geneva, Trump's Ambassador to the WTO Dennis Shea gave a tough speech to the WTO General Council. The Ambassador's remarks were replete with misstatements of trade law and misstatements of fact. This was par for the course in an Administration that seems to believe that if one repeats a falsity enough, it will become true.

So far, I have not seen any refutation of Ambassador Shea's spurious assertions. So, for the record, let me debunk them one by one.

Shea's first claim is that there is a DSU rule that "A person who has ceased to be an Appellate Body member may not continue deciding appeals as if his term has been extended by the Dispute Settlement Body." That claim is untrue because the Appellate Body, pursuant to its authority in DSU Article 17.9, enacted Working Procedures back in the mid-1990s that provided for the contingency of an expiration of an appellator term during the pendency of an appeal on which the appellator had been assigned to "serve." This administrative law (Rule 15) allows such an appellator to complete his or her service on that appeal. The Trump Administration has suggested that Rule 15 is ultra vires, but DSU Article 17.1 does not contain any conflicting black letter law that in the event that an appellator term expires, the appellator must resign from a tribunal.

Consider this counterfactual: If the Appellate Body had not written the wise contingency rule (in Rule 15), the Appellate Body would have had to discontinue many ongoing appeals when one of the sitting appellator's term ended. Scotching ongoing appeals might have been convenient for the United States which is the most frequent WTO defendant and the most frequent loser of WTO cases against it. But judicial dissolution would have been a bad outcome for the WTO dispute system.

Second, Shea asserts that there is a DSU rule that "The Appellate Body may not make findings on issues of fact...." No authority was offered for that proposition and certainly the DSU does not forbid the Appellate Body from making incidental statements of fact. Of course, the Appellate Body should not entertain new facts and or substitute itself for the panel's role as the trier of facts. But the Appellate Body has not done so. The DSU does say that appeals "are limited to issues of law," but that basis for appeal should not be understood to prohibit the Appellate Body from addressing the facts necessary to accomplish its mandate "to uphold, modify or reverse the legal findings and conclusions of the panel" (DSU Article 17.13).

Third, Shea asserts that there is a DSU rule that "The Appellate Body may not give advisory opinions on issues that will not assist the DSB [Dispute Settlement Body] in making a recommendation to bring a WTO-inconsistent measure into compliance with WTO rules." While there is no DSU rule stating that proposition exactly, no one would deny that the Appellate Body should not be issuing advisory opinions. But the Appellate Body has not issued such opinions. Thus, Shea's assertion that "the DSU provides for rules, and "those rules have been broken with impunity by the Appellate Body" is false. So is his assertion that the Appellate Body "is disregarding the clear rules."

Fourth, Shea argues that there is a rule that "The Appellate Body may not assert that its reports serve as precedent or provide authoritative interpretations." Certainly, nothing in the DSU prohibits tribunal decisions from being considered as precedent by future tribunals. The entire history of dispute settlement in the General Agreement on Tariffs and Trade (GATT) going back to the early 1950s shows the regular attention by tribunals to precedent. Quite rightly, the Appellate Body has posited that absent cogent reasons, an adjudicatory body will resolve the same legal question in the same way in a subsequent case. Consistent with the approach taken by other newly-created international tribunals over the past century, the WTO Appellate Body has sought to clarify its role as a higher-level tribunal in a continuing legal system. As the DSU explains, WTO dispute settlement "is a central element in providing security and predictability to the multilateral trading system" (DSU Article 3.2). Imagine the hypothetical of the Appellate Body stating in its rules that panels should feel free to consider every case de novo and to flout the jurisprudence of the Appellate Body. Certainly, such a disconnected legal system would have failed to provide the security and predictability sought by the United States and other WTO governments who drafted the DSU. Finally, I know of no evidence that the Appellate Body has ever said that is rulings are "authoritative interpretations," and Shea cites no caselaw to that effect.

Fifth, Shea states that "the Appellate Body may not change Members' substantive rights or obligations as set in the text of the WTO agreements." That statement is true as evidenced by DSU Article 19.2. But the Trump Administration's assertion that the Appellate Body has broken this rule is false. The biggest problem the United States has with the Appellate Body is that the United States has lost an obscene number (presently 49) cases against it for violating WTO trade remedy rules. The perennial arguments by the US Trade Representative about the Appellate Body have little to do with WTO constitutional principles. Rather, the behavior of US trade officials can be explained by the longtime US abuse of trade remedies (like antidumping duties) to protect politically connected US industries.

Seventh, Shea asserts that "the Appellate Body must circulate its reports within 90 days of an appeal." Under DSU Article 17.5, the 90-day deadline is real. And it's true that the Appellate Body has in recent years often missed that deadline. But to assert that the Appellate Body is "disregarding" this clear timing rule is a false claim. A missed deadline by the Appellate Body is not an expression of its agency, but rather a manifestation of the principle of necessity. Every time it misses the 90-day deadline, the Appellate Body explains why in advance. The top reason has been the lack of judicial or staff resources.

Under WTO law, WTO members have an obligation to provide the Appellate Body "with appropriate administrative and legal support as it requires" (DSU Article 17.7 emphasis added) and to fill appellator vacancies "as they arise" (DSU Article 17.2) WTO Members have failed to fulfill those two key administrative obligations, and the Appellate Body should not be blamed for those failures.

During the past week in meetings in Washington, DC, I have heard it said several times that the Appellate Body is guilty of "overreaching" and that it is "exceeding its mandate." Such mantras are not true, no matter how often they are repeated. Since 1996, I have examined over 140 WTO Appellate Body decisions. I have discussed many of them in my classes and wrote commentary on more than I wish to remember. Sometimes by my lights, the Appellate Body gets its wrong. But like any independent international or domestic court, the Appellate Body is interpreting and enforcing the law as it sees it.

It's a myth that the Appellate Body is "overreaching", "coloring outside the lines", "exceeding its mandate" or any of the other similar criticisms being hurled at the Appellate Body by bullies who know that the Appellate Body will refrain from trying to defend itself.

I am happy to defend the Appellate Body. And WTO Member governments need to stand up to the Trump Administration and not cave into its efforts to crush the WTO compliance system.